With the start of 2019 and companies kicking into gear we thought we would help prospective and current tenants into making better decisions when it comes to renting commercial property. Here are 5 Costly Mistakes Companies Make When Renting a Property.
1. How much of your rent is going towards Common Area
In the past we have had situations where some clients have come to us where they have been contributing as much as 25% of their rent to common areas. All being equal, you should really expect 10-15% of your rent to go to common areas. If you’re paying more, it’s is likely a sign that the building is inefficient and badly designed.
Common Areas are best defined as areas used by all tenants. This could be stairwells, lobbies, kitchens and rest rooms. These are paid as a percentage or pro rata contribution of the rent. You must know what you’re paying for, and a distinction is made between usable area (which is the actual space the tenant occupies) and the common area.
2. Didn’t negotiate for a better deal
When looking for office space it is always important to ensure that you have negotiated the best terms for your lease agreement. This has the potential to be your business address for many years. With this comes financial obligations that are positive or detrimental to your business’s cash flow. It is imperative that you negotiate the best possible rental.
Do your research on comparative rentals in the areas you are interested in as this will prepare you when negotiating with the landlord.
You are going to be in the building for many years. As a result it is important to ensure you have secured a rental escalation that works for your business. Currently rental escalations are sitting between a low of 7% to a high of 10%. Be bold, ask for that low rental escalation!
3. Have you chosen the right location
The average South African spends 30 to 90 minutes travelling to work. It is important to take into consideration your employees and their travel time, cost and accessibility to public transportation. Businesses make the mistake of occupying commercial space that may not be helpful to their employees or clients.
It is important that the location of your business is situated close to arterial routes for general accessibility. Yet cognisance must be given to the fact that your rental will be at a premium in high demand areas.
When looking at where you would like your business to be it must be noted that rental rates differ in areas. For example, commercial space in Sandton is not priced the same as space in Randburg. Remember that although you may want to be in a specific area for the image of your business it may not always make financial sense.
4. Not choosing the right space
Whatever size your business is, whether you’re a start-up, SME or a blue-chip company, it is likely that you’re hoping to grow in the future. When your success allows this; it’s helpful that the office space you’ve chosen is flexible and allows you to upscale easily and inexpensively.
It is imperative when sourcing a new premises for your business you choose the correct amount of space. You don’t want to be in position to have underestimated the size you need only to have signed a long term lease.
Space planners provide the best assessment of your space. Ensuring you have made the best decision for your business for the short and long term. At Shiny Rock Properties we can provide potential lessee’s with access to effective space planners.
Yet, a good guide when entering into a lease agreement is to use the following ranges 1 person/10sqm. You can go as far as 1 person/20sqm. It does depend on what kind of business you are running. For example a call centre vs a law firm.
Is your office conveying the correct image? This is about much more than vanity. Whatever image you want your company to portray, it’s important that your offices reflect those values. Location of an office affects the likelihood of attracting high quality staff and clients, the design and décor of the building your office can to. If your offices are housed within a clean, modern and well-designed premises, it can only benefit you and your business in the long run.
5. Have you explored all incentives offered by landlords
In our current economic climate landlords are going to great lengths to entice tenants to move into their buildings. One of the many ways they are doing this is providing competitive tenant installation allowances and incentives. It is important for tenants to way up which landlord is proving what to secure the best possible deal for your business.
Tenant installation allowance is an allowance afforded to the tenant by the landlord. It is an allowance that assists tenants to fit out and change a leased space ensuring it is more suitable to the tenants specific needs. When leasing a property it is so important that tenants ask the landlords what tenant installation allowance is provided.